Compensation Plan for the Sales Team
- The sales team members must be compensated as per the market rate. So, find out what are the prevailing compensation plans for various levels within a sales team structure.
- Some companies follow salary as a fixed compensation method.
- Others organize this as a combination of a fixed salary and variable components.
- Incentives or commission based on the achievement of targets makes the variable component in such cases.
- The incentive or commission scheme is not a rule and it depends upon the company policy, industry practices, affordability, practicality and the challenges on hand.
- If the company management agrees, the sales team may be given incentives for achieving some sales target. But, the incentive must be planned, communicated and executed very carefully. Keep the following in mind while deciding incentives / commission to the sales team:
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- Remember, incentives can boost the morale of a sales team, but a badly executed or confusing incentive scheme can cause a lot of frustration and dissatisfaction among the sales team members. If this happens, the whole purpose behind the incentives will be lost.
- Also, incentives is a one-way street, i.e. if we start giving it once, it will raise the expectations of the sales team forever. Once started, it will be very difficult to stop. So, if we are not sure of continuing it, we should think very carefully before starting it.
- Clarify the various terms and conditions of the incentives very clearly and explain to the concerned team members in detail. Also, confirm that they have understood and agreed to it.
- If incentive is to be given on the sales amount, it is advisable to give it on the realized sales amount, i.e. the sales for which the money is received. If we calculate and pay incentive on the sales bill amount only and then discover that a part of this sales resulted in bad debts, then it will create very unpleasant situation.
- Be fair and prompt in paying the dues of incentives. If we delay in payment of incentives, it may demotivate the sales team.
(Expert advice to GROW your business wherever you are, whenever you want.
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